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49 Cards in this Set

  • Front
  • Back
This is a measure of average output or real output per unit of input.
Productivity
Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases
business cycle
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoff; unemployed workers between jobs
frictional unemployment
Unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available
Structural Unemployment
A type of unemployment caused by insufficient total spending (or by insufficient aggregate demand)
cyclical unemployment
The full-employment rate of unemployment; the unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output; the unemployment rate at which actual inflation equals expected inflation.
natural rate of unemployment (NRU)
The use of all available resources to produce want-satisfying goods and services.
Full Employment
A rise in the general level of prices in an economy.
Inflation
An index that measures the prices of a fixed "market basket" of some 300 goods and services bought by a "typical" consumer.
Consumer Price Index (CPI)
Increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand.
Demand-pull Inflation
Increases in the price level (inflation) resulting from an increase in resource costs (for example raw materials cost) and hence in per-unit production costs.
Supply-Push Inflation also Cost-push Inflation
Number of dollars received by an individual or group for its resources during some period of time
Nominal Income
The amount of goods and services that can be purchased with nominal income during some period of time; nominal income adjusted for inflation.
Real Income
A decline in the economy's price level.
deflation
A very rapid rise in the price level; an extremely high rate of inflation.
Hyperinflation
An automatic increase in the incomes (wages) of workers when inflation occurs; guaranteed by a collective bargaining contract between firms and workers.
Cost-of-living adjustment
The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation.
Nominal Interest Rate
The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate less the expected rate of inflation.
Real Interest Rate
A schedule showing the amounts households plan to spend for sonsumer goods at different levels of disposable income
consumption schedule or consumption function
A schedule that shows the amounts households plan to save (plan not to spend for consumer goods), at different levels of disposable income
saving schedule or saving function
Fraction (or percentage) of disposable income that households plan to spend for sonsumer goods and services; consumption divided by disposable income.
Average propensity to consume (APC)
Fraction (or percentage) of disposable income that households save; saving divided by disposable income.
Average Propensity to Save (APS)
The fraction of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income.
Marginal propensity to consume (MPC)
The fraction of any change in disposable income that households save; equal to the changes in saving divided by the change in disposable income.
Marginal propensity to save (MPS)
The ratio of a change in equilibrium GDP to the change in investment or in any other component of aggregate expenditures or aggregate demand
multiplier
The tendency for peaple to increase their consumption spending when the value of their financial and real assets rises and to decrease their consumption spending when the value of those assets falls.
wealth effect
The gain in net revenue divided by the cost of an investment or an R&D expenditure; expressed as a percentage.
Rate of Return
A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels
aggregate demand
A schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels
aggregate supply
A wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover
efficiency wage
The reluctance of firms to cut prices during recessions (that they think will be short-lived) because of the costs of altering and communicating their price reductions
Menu Costs
A measure of average output or real output per unit of input.
Productivity
The aggregate supply curve associated with a time period in which input prices (especially nominal wages) are fully responsive to changes in the price level.
long-run aggregate supply curve
An aggregate supply curve relevant to a time period in which input prices (particularly nominal wages) do not change in response to changes in the price level.
Short-run aggregate supply curve
A curve showing the relationship between the unemployment rate (on the horizontal axis) and the annual rate of increase in the price level (on the vertical axis).
Phillips Curve
A curve relating government tax rates and tax revenues and on which a particular tax rate (between zero and 100 percent) maximizes tax revenues
Laffer Curve
Inflation accompanied by stagnation in the rate of growth of output and an increase in unemployment in the economy; simultaneous increases in the inflation rate and the unemployment rate.
stagflation
Sudden, unexpected changes in aggregate supply.
Supply shocks
A wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover
efficiency wage
What are the 4 stages of a business cycle?
Peak, Recession, Trough, Expansion
What are the 3 types of unemployment?
Frictional Unemployment, Structural unemployment, Cyclical unemployment
Who is considered unemployed in the United States?
Those who are not employed but are actively looking for employment.
How is the unemployment rate calculated?
(# of unemployed / labor force) X 100
What is inflation and how is it calculated?
Inflation is a general rise in the price level, it is calculated in the Consumer Price Index (CPI)
What is the difference between demand-pull and supply-push inflation?
Demand-pull inflation is caused by too much spending relative to output. It can also be caused by the central bank printing too much money. Supply-push inflation is caused by an increase in input (material) costs.
Who is hurt by inflation and who is helped by inflation?
Those who are hurt:
Fixed-income receivers, Savers, and Creditors
Those who are helped:
debtors
What is the difference between nominal interest rates and real interest rates?
Real interest rates are adjusted for inflation and nominal interest rates are not.
What is meant by the Income-Consumption relationship?
The greater peoples incomes, the more they will consume
What beside income can shift the consumption function (schedule)?
a decrease